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    Wisconsin Lawyer
    June 01, 1999

    Wisconsin Lawyer June 1999: Supreme Court Digest

    Supreme Court Digest


    By Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

    | Civil Procedure | Criminal Law | Criminal Procedure | Evidence | Taxation | Torts |


    Civil Procedure

    Offers to Settle - Clarification - Insurer's Duty - Coverage Disputes

    Prosser v. Leuck, No. 97-0686 (filed 21 April 1999)

    In 1992 Leuck, then a minor, started a fire that destroyed Prosser's warehouse. In 1993 Prosser sued Leuck and his parents' homeowner's insurer. The insurance policy's limit was $100,000. In October 1993 Prosser offered to settle for $99,750 "plus the actual costs of this action." The offer, addressed only to the insurer and its attorneys, promised to dismiss "this pending litigation and the entirety of defendant's liability" upon receipt of the payment. The insurer did not respond, choosing instead to litigate coverage under an intentional acts exclusion. Eventually, the courts ruled that the Leucks were covered and the insurer tendered the $100,000 policy limit to Prosser. Prosser declined and filed a motion for summary judgment for double costs and interest pursuant to sections 807.01(3) and (4) of the Wisconsin Statues based upon the insurer's earlier refusal of his settlement offer. The trial court granted interest but excluded the time period during which the coverage issue was litigated. It refused to grant double costs as well, reasoning that most of the cost incurred involved the coverage dispute. The court of appeals held that the original offer was ambiguous and therefore invalid; thus, Prosser was not entitled to interest or costs.

    The supreme court, in an opinion written by Justice Bablitch, reversed. The court held that "an insurer, as part of its fiduciary duty to its insured, has a duty to clarify an offer of settlement that is ambiguous with respect to whether the offer applies to only the insurer or both the insurer and the insured. Failure to clarify the ambiguity results in a valid offer pursuant to Wis. Stat. sec. 807.01." Obviously, Leuck's interests were directly affected by the terms of the offer. If it extended only to the insurer, Leuck was left without coverage. If it applied both to him and the insurer, he was released from additional exposure. The court also held that "Prosser is entitled to double costs, including costs associated with determining coverage, and interest from the date of the settlement offer throughout the trial on determining coverage." The issues of double costs and interest are governed by the same standard in "determining whether a judgment is greater than or equal to a rejected settlement offer." In this case, the stipulated judgment of $100,000, exclusive of costs, exceeded the rejected settlement offer of $99,750, exclusive of costs. The court's conclusion that coverage costs also are subject to doubling was supported by the policy behind section 807.01 - "to encourage pretrial settlement." Finally, the accrual of interest was not stayed because "the underlying action is stayed pending determination of coverage." The statute encompasses no such exception.

    Justice Bradley, joined by Chief Justice Abrahamson and Justice Steinmetz, concurred for the reason that the majority opinion unwisely "forces settlement" by imposing double costs and interests even while coverage is disputed.


    Criminal Law

    Attempted First-Degree Intentional Homicide - Consumption of Alcohol by Mother During Pregnancy - Alleged Injury to Fetus That Was Later Born Alive

    State v. Deborah J.Z., No. 96-2797-CR (filed 9 April 1999)

    [EDITORS' BACKGROUND NOTES TO PER CURIAM OPINION: The criminal complaint in this case charged the defendant with one count of attempted first-degree intentional homicide and one count of first-degree reckless injury claiming that the defendant intentionally consumed toxic quantities of alcohol in the last days of her pregnancy in an attempt to kill her baby. The child was born alive with a blood alcohol level of 0.199 GM/DL and was suffering fetal alcohol effects. The case proceeded to preliminary hearing and the defendant was bound over for trial. Charges filed in the information tracked those alleged in the criminal complaint. The defendant moved to dismiss the information arguing that the evidence adduced at the preliminary hearing was insufficient to support the bindover. The circuit court denied the motion. An interlocutory appeal from that decision was taken and the supreme court accepted the case on certification from the court of appeals.]

    The supreme court was equally divided on whether to affirm or reverse the order of the circuit court on the charge of attempted first-degree intentional homicide. Justices Steinmetz, Wilcox, and Crooks would have affirmed; Justices Bablitch, Bradley, and Prosser would have reversed. Chief Justice Abrahamson did not participate.

    Accordingly, the supreme court vacated its order granting certification and remanded this case to the court of appeals.


    Criminal Procedure

    Appeals - Harmless Error

    State v. Armstrong, No. 97-0925-CR & 97-0926-CR

    This brief per curium opinion clarifies the supreme court's "original" opinion at 223 Wis. 2d 331, 369-70, 588 N.W.2d 606 (1999), by expanding upon the harmless error discussion in footnote 38. In essence, the court clarified that State v. Monahan, 76 Wis. 2d 387, does not "preclude, in any way, the use of a harmless error approach in sec. 971.31(10) appeals and we withdraw from [State v. Pounds, 176 Wis. 2d 315 (Ct. App. 1993), and State v. Esser, 166 Wis. 2d 897 (Ct. App. 1992)] all language to the contrary." With this clarification, the court denied the defendant's motion for reconsideration.

    Justice Bradley, joined by Chief Justice Abrahamson, concurred but wrote separately to stress that the supreme court should have requested additional briefing on this issue.

    Guilty Pleas - Withdrawal Before Sentencing - Fair and Just Reason - Recantations

    State v. Kivioja, Nos. 97-2932-CR & 97-2933-CR (filed 4 May 1999)

    This is a tale of two plea bargains. The defendant and an accomplice were arrested and charged with a series of burglaries. The accomplice agreed to testify against the defendant in exchange for charging and sentencing concessions by the state. The agreement postponed the accomplice's sentencing until after the defendant's trial, but the accomplice later insisted upon being sentenced before he testified against the defendant. The judge sentenced the accomplice to 20 years in prison and 10 years of probation plus more than $13,000 in restitution. The sentence angered the accomplice. About two weeks later the accomplice gave statements to the defendant's investigator recanting earlier statements implicating the defendant. Meanwhile, the defendant had reached his own plea agreement with the state. By the time the accomplice recanted, the defendant already had pleaded guilty and was awaiting sentencing. Based on the recantation the defendant moved to withdraw his guilty plea. Following an evidentiary hearing in which the accomplice testified and repeated his recantation, the circuit court denied the motion. The court of appeals certified this case to the supreme court to clarify the test to be applied where a key prosecution witness recants in a plea withdrawal case before sentencing.

    The supreme court, in an opinion written by Justice Steinmetz, affirmed the circuit court's ruling, although on very different grounds. The court held that when the defendant moves to withdraw a guilty plea prior to sentencing, he need not show that the recantation is corroborated or that a reasonable person would believe the recantation. The recantation must, however, be "plausible." Put another way, "a defendant must bring forward evidence that the circuit court finds believable, without which any reason offered in support of withdrawal would not be fair and just." The supreme court formulated this standard to "help cir-cuit courts determine whether a recantation is worthy of belief and therefore a fair and just reason for withdrawal" prior to sentencing:

    "New evidence should constitute a fair and just reason where the defendant shows by a preponderance of the evidence that (1) the evidence was discovered after entry of the plea; (2) the defendant was not negligent in seeking the evidence; (3) the evidence is material to an issue in the case; and (4) the evidence is not merely cumulative." In addition to these four criteria, the "circuit court must determine that the recantation has reasonable indicia of reliability." The court also explained how this standard differs in "significant ways" from the more "onerous" test that governs plea withdrawals after sentencing. In its independent review of the record, the supreme court held that the accomplice's recantation lacked the reasonable indicia of reliability required, and thus did not constitute a fair and just reason for the plea withdrawal.

    Chief Justice Abrahamson, joined by Justice Bradley, dissented. The dissent argues that the majority opinion departs from Wisconsin's traditional approach to guilty plea withdrawals and unwisely commingles doctrine governing newly discovered evidence. The dissent formulated what it deems is a better standard for adjudicating post-plea, presentence withdrawals.

    Revocation of Probation - Certiorari Review in the Court of Conviction

    Drow v. Schwarz, No. 97-1867 (filed 5 May 1999)

    Venue in a certiorari action to review a revocation of probation is in the county in which the relator was last convicted of an offense for which he or she was on probation. See Wis. Stat. § 801.50(5). The issue in this case was whether a certiorari proceeding to review a probation revocation must be heard by the same branch of the circuit court in the county in which the probationer was convicted of the offense for which he or she was on probation.

    In a unanimous opinion authored by Chief Justice Abrahamson, the supreme court concluded that a certiorari proceeding to review a probation revocation need not be heard by the same branch of the circuit court in the county in which the probationer was convicted of the offense for which he or she was on probation. Certiorari proceedings of this sort may be heard in any branch of the circuit court in the county in which the probationer was last convicted of an offense for which he or she was on probation.

    The court indicated that its holding does not restrict circuit courts from developing and implementing local rules relating to the assignment of certiorari petitions for review of probation revocations as long as the rules are consistent with law and the supreme court's rules of judicial administration.

    Interstate Agreement on Detainers - Writ of Habeas Corpus Ad Prosequendum

    State v. Eesley, No. 97-1839-CR (filed 30 April 1999)

    The defendant was serving a federal prison sentence at the Federal Correctional Institute in Sandstone, Minn. During that time, he was charged with numerous separate state offenses by a Wisconsin district attorney. To secure the defendant's presence for his initial appearance, preliminary hearing, and arraignment on the state charges, the state circuit judge issued writs of habeas corpus ad prosequendum. Following each appearance in the Wisconsin circuit court, the defendant was returned to the federal institution.

    The defendant filed a motion to dismiss all state charges pending against him on grounds that the state had violated the Interstate Agreement on Detainers (IAD). The IAD requires that after a detainer is filed against a prisoner in another jurisdiction, a trial must be held within 120 days of the arrival of the prisoner in the state in which the trial is to be had. The sanction for non-compliance with the IAD is dismissal of the pending charges and, since the defendant was not tried on the state charges within 120 days of his first arrival in Wisconsin to answer the state criminal charges, he claimed entitlement to dismissal.

    The issue before the supreme court was whether a writ of habeas corpus ad prosequendum constitutes a detainer under the IAD. If it does, the IAD is triggered and the state must comply with the speedy trial and other provisions of the agreement. If a writ of habeas corpus ad prosequendum does not constitute a detainer, the IAD is not implicated.

    In a unanimous decision authored by Justice Bablitch, the supreme court concluded that a writ of habeas corpus ad prosequendum is not a detainer under the IAD. Accordingly, because no detainer was ever filed in this case, the IAD and its protections were never triggered.

    Stop and Frisk - Anonymous Tips - Frisks of Vehicles

    State v. Williams, No. 96-1821-CR (filed 27 April 1999)

    The Milwaukee police dispatcher received an anonymous tip indicating that people were dealing drugs from a blue and burgundy Ford Bronco parked in the driveway on the side of the caller's apartment building. This information was relayed to a patrol squad which arrived at the location within four minutes. Upon arrival the officers observed a blue and burgundy Chevy Blazer with two occupants parked at the address to which the officers had been sent. The defendant was sitting in the driver's seat; a woman was sitting in the front passenger's seat. The officers did not observe any drug activity in progress nor did they conduct any surveillance. Instead they approached the vehicle immediately. While doing so one of the officers observed that the defendant's right hand was behind the passenger's seat and, although he did not see a weapon, the officer was concerned for his safety. Therefore, he and his partner approached with weapons drawn.

    Both occupants were removed from the vehicle, patted down, and placed in the squad car. One of the officers then searched the area behind the seat where he had earlier noticed the defendant's hand hidden from view. The officer testified that the purpose of the search was officer safety because the defendant may have had a gun in his hands and possibly dropped it behind the seat. During this protective search of the vehicle, the officer recovered marijuana and cocaine.

    The circuit court denied the defendant's motion to suppress the marijuana and cocaine. However, the court of appeals reversed. It held that the information contained in the 9-1-1 anonymous call and independently corroborated by the police did not reach the requisite level of reasonable suspicion necessary for a stop. It held that reasonable suspicion under the circumstances in this case requires not only that the police corroborate anonymous tips with independent observation of the details of such calls, but that they also must either corroborate the predictions contained in those tips or make independent observations of suspicious activities.

    In a majority opinion authored by Justice Steinmetz, the supreme court reversed the court of appeals. In executing a valid investigatory stop of an individual, the law enforcement officer need only reasonably suspect, in light of his or her experience, that some kind of criminal activity has taken or is taking place. In determining what facts are sufficient to authorize police to stop a person, the totality of the circumstances must be taken into account. In this case the officers had the following facts and information before them: an anonymous 9-1-1 phone call from a citizen informant detailing information concerning his or her contemporaneous observation of illegal drug dealing activity; independent corroboration of the readily observable information from that tip; a quick response time in which the officers arrived at the scene; the observation that the vehicle involved did not have any license plates; and the officers' inability to observe the defendant's hand. Considering the totality of these circumstances, the court concluded that the officers had the requisite reasonable suspicion to "stop" the defendant.

    In so holding the court rejected adoption of a categorical rule requiring police corroboration of predictive information as a precondition to reliance on anonymous tips. The absence of information predicting the future behavior of an individual who is the subject of an anonymous tip does not necessarily make that tip worthless. An anonymous tip that is, as in the present case, supplied by a citizen informant, lacking in predictions but describing a crime in progress, can be accorded some weight in an officer's consideration of reasonable suspicion.

    With regard to the protective frisk of the vehicle, the court noted that the officers were investigating suspected drug dealing. As they approached the defendant's vehicle, the defendant's hand was hidden from their view. When the defendant was frisked, he did not have any weapons on his person. Under these circumstances the court concluded that it was not unreasonable for the officer to suspect, as he did, that the defendant may have had a weapon and dropped it on the floor of the vehicle before he exited it. These circumstances justified the limited search of the vehicle for they lead a reasonably prudent individual to the conclusion that his or her safety is in danger.

    Justice Prosser filed a concurring opinion. Justice Bablitch filed a dissent that was joined by Chief Justice Abrahamson and Justice Bradley.


    Evidence


    Other Acts - Sentencing - Probation Modification

    State v. Gray, No. 96-3363-CR (filed 16 April 1999)

    The defendant was originally convicted of obtaining controlled substances by misrepresentation (forged prescriptions). The primary issue on appeal concerned the state's introduction of "other acts" evidence.

    Affirming the conviction, the supreme court applied the three-step analysis that it formulated last term in State v. Sullivan (1998). The other acts consisted of a 1990 conviction for obtaining drugs by misrepresentation and several uncharged instances involving the use of forged prescriptions. Under the first step, the court examined whether the trial court properly admitted the other acts evidence for an "acceptable purpose" under section 904.04(2). Discussing each proffered purpose separately, the court held that the evidence was properly admitted to prove identity, plan, proof of motive, and absence of mistake. It also found that the evidence was relevant to establish each purpose. Other acts need not take the form of prior convictions. In response to the defendant's contention that the state had not offered sufficient proof that he had committed the other acts, the supreme court applied the test of conditional relevancy applied in federal court and several Wisconsin court of appeals cases: Could a jury acting reasonably find that it is more likely than not that the defendant committed the other act? On this record the state had satisfied this standard. Finally, the court held that the evidence was not so "unfairly" prejudicial under section 904.03 that it warranted exclusion. It noted that the trial judge read the standard cautionary instruction, Wis JI - Criminal 275.

    The second issue concerned the trial judge's power to modify the defendant's probation sentence before the probation period actually began. Originally the defendant was convicted and sentenced on three counts. On postconviction motions the trial court overturned two of the judgments and then modified the disposition on the remaining count. The supreme court held that section 973.09(3), of the Wisconsin Statutes "allows circuit courts to modify conditions of probation at any time before the period of probation expires, even before the period of probation begins."


    Taxation


    Property Taxes - Exemption for Benevolent Associations - Wis. Stat. section 70.11

    Deutsches Land Inc. v. City of Glendale, No. 96-2489 (filed 16 April 1999)

    Deutsches Land Inc. is a nonstock, nonprofit corporation organized under Chapter 181 of the Wisconsin Statutes. It primarily serves as a holding corporation for the real estate and fixed assets of five incorporated nonstock, nonprofit benevolent associations that exist for the purpose of preserving Germanic heritage and culture.

    For the benefit of the benevolent associations, Deutsches Land holds title to roughly 14 acres of property located in the City of Glendale. Though the property officially comprises a single parcel, Deutsches Land treats the property as if it were four lots. Two of the lots have buildings upon them and the remaining two lots, totaling approximately 5.5 acres, are soccer fields.

    One of the two lots containing buildings is called "Old Heidelberg Park," which covers about 4.5 acres. It is the sight at which the benevolent associations conduct two major public festivals. While Deutsches Land does not officially lease the park to any entity, it allows Bavarian Waldhaus Inc. to use it on approximately 20 occasions annually. Waldhaus is a for-profit corporation created by the benevolent associations. Waldhaus uses the park to host corporate picnics at which it supplies food and beverages.

    The last parcel, which is four acres in size, contains a parking area for the entire 14-acre parcel and a significant structure that houses the Bavarian Inn Restaurant, which is a full-service, for-profit bar and banquet facility open to the public. Deutsches contracts with Waldhaus to operate the Bavarian Inn Restaurant.

    Deutsches Land sought a full exemption from property taxes for the soccer fields and Old Heidelberg Park and a 25 percent exemption for the Bavarian Inn building for the years 1993-95. Glendale denied the applications and Deutsches Land filed suit. The circuit court ruled that Deutsches Land was entitled to a full exemption on the soccer fields and Old Heidelberg Park, and a 25 percent exemption for the Bavarian Inn building. The court of appeals reversed the circuit court.

    In a majority opinion authored by Justice Bradley, the supreme court affirmed the court of appeals. It concluded that Deutsches Land did not sufficiently show that it was entitled to an exemption from real property taxes for the years in question. Deutsches Land is a benevolent association under Wis. Stat. section 70.11(4). This was never in dispute. However, Deutsches Land did not produce sufficient evidence showing that the corporate use of Old Heidelberg Park was incidental in comparison to the benevolent use of the park. Similarly, it did not sustain its burden of proving entitlement to a real property tax exemption for the Bavarian Inn inasmuch as it failed to produce sufficient evidence to measure a comparison between for-profit and exempt use of space, time, and income. The court further concluded that because of its evidentiary failure to support an exemption for any building, Deutsches Land was not entitled to an exemption on the soccer fields either. It failed to show that the fields are "necessary for the location and convenience" of any building that is exempt under section 70.11.

    Justice Prosser filed an opinion concurring in part and dissenting in part. Justice Wilcox joined Justice Prosser's opinion.


    Torts


    Child Labor Laws - Street Trades - Employer's Knowledge - Protected Class

    Beard v. Lee Enterprises Inc., No. 96-3393 (filed 9 April 1999)

    Jane Beard's husband was killed in a collision with AK, a minor. Beard alleged that AK was employed by a newspaper at the time and was working in a "street trade" during prohibited hours, contrary to section 103.21(1) (1991-92). AK's father had a "bundle delivery agreement" with the newspaper to distribute the papers. The fatal collision occurred at about 4:15 a.m. on a Friday. AK had just finished delivering papers for his brother, who was a paper carrier, and had bundles of Sunday supplements in the van for his father. The circuit court dismissed the complaint and the court of appeals affirmed. It held that the plaintiffs had to show that the employer (the newspaper) exercised some control over the method or route of AK's travel home before it could be found to have violated the child labor laws.

    The supreme court, in an opinion written by Justice Wilcox, reversed. First, the court held that "knowledge, actual or constructive, is implicit in the employer/employee relationship involving a publisher, or an intervening agency, and a minor involved in a street trade under sec. 103.21(1), on the part of the employer as to whom it is employing." In this case the evidence conflicted as to what the employer knew, if anything, about AK's distribution of newspapers and bundles. For this reason, summary judgment was inappropriate.

    Second, the court also held that "whether there was a child labor law violation and whether that violation occurred while [AK] was acting within the scope of his employment are factual questions which should also be determined by a jury and not decided on summary judgment."

    Finally, the court addressed whether the deceased victim fell within the class of persons protected by the child labor laws. It held that "if it is determined that: (1) [The employer] had actual or constructive knowledge of [AK's] employment; (2) [the employer] violated a child labor law; (3) such violation occurred at or about the time of the injury; then we conclude that the public highway could be [AK's] place of employment and [the deceased], who was driving on the public highway, could be a frequenter intended to be protected by the child labor laws to the extent that [AK] was present and may have been engaged in the distribution of newspapers - a street trade." If all these predicates are established, the employer is liable for the victim's death.

    Justice Bradley, joined by Chief Justice Abrahamson, concurred but disagreed with the majority's conclusion that "absolute liability automatically results from a violation of the child labor laws regardless of who is injured."

    Damages - Economic Loss Doctrine - Consumer Actions

    State Farm v. Ford Motor Co., No. 97-2594 (filed 4 May 1999)

    In 1994 Renberg bought a used 1990 model Ford truck along with an extended service contract. In 1996 the truck burst into flames as it sat parked at Renberg's workplace. Renberg's insurer, State Farm, paid him the value of the vehicle. Later that same year Renberg received a recall notice from Ford warning about a faulty ignition switch that could cause a fire. State Farm brought this subrogation action to recover the money it had paid to Renberg. Its claims sounded in negligence and strict liability; contract-based claims were dismissed because the truck was purchased "as is" and the extended warranty had expired. The circuit court dismissed the action because the economic loss doctrine barred recovery.

    The supreme court, in an opinion written by Justice Bablitch, affirmed. The court held "that the same policies that justify applying the economic loss doctrine to commercial transactions apply with equal force to consumer transactions"; thus the economic loss doctrine barred "State Farm's tort claims for purely economic loss." "Economic loss" is defined as "the diminution in the value of the product because it is inferior in quality and does not work for the general purpose for which it was manufactured and sold." Since 1989 Wisconsin has applied the economic loss doctrine to bar tort claims in commercial transactions; put another way, persons suffering damages are left to their remedies under contract law. The majority opinion offers a lengthy policy discussion that justifies the application of the economic loss doctrine to consumer transactions as well as commercial transactions. The primary theme is the need to distinguish tort from contract claims. There is, however, a critical caveat. The majority specifically did not "reach the issue of the preclusion of a strict-liability claim when the parties are of unequal bargaining power, the product is a necessity, no alternative source for the product is readily available, and the purchaser cannot reasonably insure against consequential damages."

    Chief Justice Abrahamson dissented, joined by Justice Bradley. The dissent noted that this case involved an insurer asserting it subrogation rights and that the breadth of the majority's holding is limited by the caveat quoted above.

    Damages - Economic Loss Doctrine - Consumer Actions - No "Sudden and Calamitous Event" Exception

    General Casualty Co. v. Ford Motor Co., No. 97-3607 (filed 4 May 1999)

    This case is a companion to State Farm v. Ford Motor Co. (see digest above). The Willards' Lincoln Town Car burst into flames while it was parked in front of their house. Their insurer, General Casualty, reimbursed them for the value of the car. The insurer then brought this subrogated action joined by the Willards, who sought recovery of their deductible. The circuit court dismissed the action because of the economic loss doctrine.

    The supreme court, in an opinion written by Justice Bablitch, affirmed based on its decision in State Farm v. Ford Motor Co. In this opinion the court refused to adopt an exception to the economic loss doctrine for damages suffered in a "sudden and calamitous event." Other courts that have recognized the economic loss doctrine have rejected such an exception.

    Chief Justice Abrahamson, joined by Justice Bradley, dissented for the reasons set forth in their dissent to State Farm v. Ford Motor Co.

    Prof. Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and questions about the digests. They can be reached at the Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.


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